Call for Evidence - Welsh Carbon Budgets
The Environment (Wales) Act received Royal Assent in March 2016. It sets a 2050 target to reduce
emissions by at least 80% and provides the legislative framework for establishing a carbon budgeting
approach in Wales.
The Act requires that before the end of 2018, Welsh Ministers must set in regulation interim emissions
targets for 2020, 2030 and 2040, together with 5-year carbon budgets for the periods 2016-2020 and
2021-2025.
The Committee on Climate Change has been asked by the Welsh Government to provide advice on these
emissions targets and is seeking evidence to help with that task.
The Committee will provide advice in two stages:


Stage 1: Advice on carbon accounting and design of Welsh carbon budgets/targets (March 2017)
Stage 2: Advice on the level of ambition embodied within the targets and budgets and sectors in
which there are particular opportunities to decarbonise (October 2017)
This Call for Evidence focuses on the first of these stages. Responses to this Call will help inform the
Committee’s advice to the Welsh Government, to be published in March 2017. This Call contains questions
relevant to the Act, including the emissions accounting framework, scope of the targets and role for
emissions trading.
Our subsequent advice on the level of the targets and budgets will be the focus of a second Call for
Evidence later in 2017. The deadline for responses is 12 noon on 1 February 2017. For information
about how to submit your response to this call for evidence, see: INSERT LINK
a. Form of emissions targets and carbon accounting framework
The Environment (Wales) Act requires interim targets to be set for 2020, 2030 and 2040, as a percentage
reduction against baseline (essentially 1990) emissions. It also requires carbon budgets to be set as a
maximum amount of emissions produced in Wales over a 5-year period (initially 2016-2020 and 20212025).
When targets are set, they are done so on the basis of the latest understanding of climate science and the
best estimates of recent and historical emissions. However, over time methodological changes are made to
how emissions under the greenhouse gas inventory are estimated, in order to improve the quality of these
estimates.
The revisions to the emissions estimates reflect an updated understanding of actual levels of emissions, and
therefore of their contribution to climate change. These revisions affect both recent and historical
estimates of emissions, and can make targets harder or easier to meet without reflecting actual progress in
reducing emissions.
Budgets set on an absolute basis, specifying the allowed quantity of emissions, retain a link to the
underlying climate science regarding the extent to which they affect the climate. However, they would be
more vulnerable to changes in inventory estimation practices, potentially making budgets much harder or
easier to meet.
An alternative approach would be to base budgets on percentage reductions relative to the base year
(1990). These would be less affected by such revisions, as estimates of current emissions and those in the
base year would, in general, move in the same direction. However, budgets on a percentage basis are less
strongly linked to the absolute level of emissions, which are the fundamental driver of climate change.
Question 1: Is it better for carbon budgets be set on percentage or absolute terms, given that the interim
targets are set as percentages?
ANSWER:
Question 2: What else can be done to make targets resilient to future revisions to the greenhouse gas
inventory?
ANSWER:
b. Role for emissions trading and implications for the competitiveness of Welsh industry
There are various different ways to account for emissions under domestic climate targets. The primary
questions relate to their interaction with wider frameworks for emissions reduction. In the case of Wales,
this means interaction with the EU emissions trading system (EU ETS) and UK carbon budgets .
There are two main ways of accounting for emissions:

‘Gross’ basis. Emissions could be accounted for on a ‘gross’ basis, with actual emissions counting
towards the targets for all sectors, as with the existing target to reduce Welsh emissions by 40% by
2020. This would reward action to reduce emissions in sectors covered by the EU ETS (the ‘traded
sector’), for example through reducing the carbon-intensity of electricity generation or from
reduced emissions at Welsh carbon-intensive industrial facilities (whether from improvements in
carbon intensity or reduced output).

‘Net’ basis. Accounting for emissions on a ‘net’ basis, as under the UK carbon budgets, also counts
actual emissions for sectors outside the EU ETS (the ‘non-traded sector’). However, the traded
sector would be reflected in the Welsh Account as a cap reflecting Wales’s share of the overall EU
ETS cap. This means that investment in low-carbon power generation – or other emissions
reduction in the traded sector – would not directly affect the level of emissions accounted within
the Welsh Account. From a carbon budgeting perspective, a ‘net’ approach effectively fixes the EU
ETS contribution to the targets and removes the variability from the EU-ETS sector.
Policy levers available to the Welsh Government currently have very limited influence on the level of
emissions from EU ETS installations.
Emissions in Wales (on a gross basis) have fallen 18% since 1990. However, since 2009 they have risen 1%
per year largely due to average rises in emissions from power and industry. Industry emissions account for
a much larger share of total emissions in Wales than other areas of the UK with 34% from the sector
(compared to 22% at a UK-wide level). Power emissions account for 28% of total. Both of these sectors are
largely traded in the EU ETS and therefore the split between traded and non-traded emissions is significant
in Wales, with 56% of total emissions covered by the EU ETS.
Depending on the future relationship with the European Union, participation in the EU Emissions Trading
System (EU ETS) may or may not continue.
For those sectors where emissions are accounted for on a gross basis, there is the potential to make up
shortfalls in emissions reduction by buying international ‘offset credits’ (i.e. resulting from overseas action
to reduce emissions) to make up the difference. This could provide additional flexibility in how nearer-term
targets are met. Credit purchase could imply costs to the Welsh Government and would need to be
procured through a programme that meets a required standard.
However, the Committee’s position is that we should plan now for the 2050 target at UK level to be met
through domestic action, given that emissions credits may be unavailable or expensive.1 Nearer-term
reliance on offset credits would be inappropriate if it meant that domestic action is insufficient and is not
on track to meet the 2050 target.
1
CCC (2015) The fifth carbon budget – The next step towards a low-carbon economy,
https://www.theccc.org.uk/publication/the-fifth-carbon-budget-the-next-step-towards-a-low-carbon-economy/
Question 3: What is the role of the EU ETS or other trading schemes in contributing to Welsh emission
reductions and could this differ between sectors (power, industry)?
ANSWER:
Question 4: Given that UK carbon budgets cover all of Wales’s emissions and are set on a net basis, does
this influence how accounting should be approached for Welsh climate targets?
ANSWER:
Question 5: Given the UK context, should the design of welsh targets and budgets reflect devolved
competence?
ANSWER:
Question 6: Are there any competitiveness implications for current traded sector business (e.g. industry) in
having gross emissions targets in Wales, and if so how could they be minimised?
ANSWER:
Question 7: What is the role for purchase of international offset credits to supplement action to meet
Welsh emissions targets?
ANSWER:
c. Scope of emissions targets
The Welsh Government has asked the Committee whether or not emissions from Wales’s share of
international aviation and international shipping (IAS) emissions should be included within the targets and
budgets.
Under the Climate Change Act at UK level, IAS emissions are currently outside the scope of the 5-year
carbon budgets, but are taken into account in their setting. The Committee’s approach has been to include
IAS emissions within the scope of the target to reduce emissions by at least 80% by 2050, and examine
what levels of reductions are required in the other sectors in order to meet this target. This has been part
of the analytical work that has gone into recommending the first five UK carbon budgets, which to date
have all been legislated in line with CCC advice.
The Committee has previously set out a principle that IAS emissions should be included within the scope of
UK carbon budgets if it is practical to do so. On this basis, alongside our recommendation on the level of
the fifth carbon budget, the Committee recommended that the scope of UK carbon budgets be expanded
to include international shipping.2 However, the UK Government rejected this aspect of our
recommendations.
Inclusion of international aviation within carbon budgets is complicated by carbon accounting regulations
relating to their inclusion with the European emissions trading system. As UK carbon budgets are
accounted for on a net basis and the EU ETS covers flights within Europe but not those outside (i.e. only a
subset of international flights), we recommended that inclusion of international aviation is not currently
practical. However, it could be included were the basis of carbon accounting to be gross (i.e. actual)
emissions, by using estimates of fuel sales.
Question 8: In principle, should international shipping be included within Welsh emissions targets, and if so
are there any practical difficulties with doing so?
ANSWER:
Question 9: In principle, should international aviation be included within Welsh emissions targets, and if so
are there any practical difficulties with doing so?
2
CCC (2015) The fifth carbon budget – The next step towards a low-carbon economy,
https://www.theccc.org.uk/publication/the-fifth-carbon-budget-the-next-step-towards-a-low-carbon-economy/
ANSWER: